How affordable is affordable housing?

India 3 November 2016: Everyone talks about affordable housing, but no one actually delivers it. The reason is simple — residential units which come with the tag ‘affordable’ are often unaffordable to many. But giving the idea of affordability serious thought, the government has been keen in promoting the ‘Housing for All’ mission by 2022. According to government estimates, India has a shortage of 1.88 crore urban homes for the 12th five-year plan (2012-17) period. This includes housing the economically weaker and lower income groups, an area where developers hardly focus on due to low margins.

“Translating the affordable housing initiative into actionable targets would involve the construction of close to 20 lakh homes every year. Compare this with the actual delivery of 12 lakh homes annually during the 11th five-year plan period (ending March 2012), the target clearly appears formidable,” pointed out Suresh Hari, Secretary - CREDAI Bengaluru. Detailing out his formula, he says, “Raising the delivery targets of central/state housing boards may not be the way to go, given the lack of availability of large land holdings within city centres with such agencies and their slack delivery track records.

One effective alternative appears to be the expansion of the infrastructure network, thereby opening up new and relatively cheaper land parcels for real estate development that will attract private participation.” About 37.7 crore people from India’s total population of 1.21 billion are urban dwellers. With more than one crore migrating to cities and towns every year, the total urban population is expected to reach about 60 crore by 2031.

Furthermore, between 2015 and 2031, the pace of urbanisation is likely to increase at a compounded annual growth rate (CAGR) of 2.1 per cent, which is estimated to be almost double that of China. These figures clearly state that the topic is both contemporary and serious. “It is unfortunate that an affordable home has no clear definition from Indian government, in terms of price and size. In absence of clarity, multiple authorities and institutions have different benchmarks to cater to the common man. The recent central government thrust on affordable housing in terms of tax breaks for developers brings focus within industry to cater to the common man. Going forward, it will no longer be restricted to far flung places,” said Om Ahuja, CEO (Residential), Brigade Enterprises Limited.
Affordable housing prices differ from city to city. In Bangalore, homes costing below Rs 65 lakh is the ideal. Affordability within municipal limits would mean a Rs 50 lakh budget in Chennai. In Kerala, which has the highest labour cost in the country, the price of an affordable home is Rs 40-45 lakh. Suresh Hari suggests that affordability should have certain important components. “Normally a size of 600 to 700 sqft is perfect for a low or middle income family.

The cost should be in the range of Rs 25 lakh to Rs 35 lakh. Incentives from government in the form of Registration charges reduction, property tax concession and moderate taxes should be provided. For a developer to execute such homes, they should also have similar reduction or waiver of multitude of taxes/levies. Allotment of land at concessional rates to enable viable projects is another area which should be looked upon,” he added.